<< Epidemiology and Intervention Research Faced with an epidemic of tobacco-related diseases and associated economic costs, governments have a variety of regulatory and policy tools at their disposal. Empirical evidence suggests that taxes on tobacco products are in fact the most effective, and cost effective, policy tool for reducing the consumption of tobacco products. The aim of this study is to evaluate the effectiveness of taxation as a policy tool to reduce consumption in Mexico. To achieve that, it is important to determine the price elasticity of demand—to be able to calculate the impact of price increases, and predict the extent to which potential price increases would translate into decreases in consumption. Estimating the price elasticity of demand for tobacco products is complicated by the existence of an oligopoly in tobacco production—producers can absorb part of a tax and not pass on the full price increase to consumers. The study will produce statistical estimates of the price elasticity of demand in the short and long term, which can in turn be used for simulations of the effects of fiscal policies of high importance for Mexico. We will also work with monthly time series data, from the Monthly Industrial Survey, so as to estimate elasticities in the short and medium term—in order to test the hypothesis of rational addiction and the effectiveness over time of taxation policies.
National Institute of Public Health, Cuernavaca, Mexico
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